When the property is finished in 2015, Industriens will take over the PPP company.Henrik Nøhr Poulsen, head of equities at Industriens, told IPE the pension fund would make a 5% annual return on the investment.“PPP projects differ a lot from project to project,” he said.“This is more like a real estate project with a government entity as the tenant, and the return reflects that.”Because Industriens’ risk in the project is extremely low, this return should be compared with that of Danish government bonds, which are currently yielding 2%, Nøhr Poulsen said.KPC is bearing the construction risk, while subsequent operations and maintenance risk will be fairly limited, he said.The agreement with the local authority runs for 10 years and can be extended for a further four years.Laila Mortensen, Industriens’ managing director, said: “The partnership makes it possible to construct a higher-quality building, which, therefore, has lower operating costs.”At the same time, the pension fund is securing a stable return for its members over a long period, she said.The hospital construction project was Industriens’ first PPP project in Denmark, the fund said.“We are glad that more PPP projects are now starting to happen in Denmark, and we would like to be involved in more of them, when projects reflect the risk we are taking and there is the prospect of getting a reasonable return,” Mortensen said.The agreement is subject to formal approval by the local authority, as well as the commissioning of the finished building. Danish labour-market pension fund Industriens Pension is investing DKK110m (€14.7m) in its first public-private partnership (PPP) project in Denmark.The pension fund said it was providing all the financing for an agreed PPP project between construction firm KPC and Denmark’s Zealand regional council (Region Sjælland) to build and run a new radiotherapy wing at Næstved Hospital.The investment will give the pension fund a 5% return for very low risk, it said.KPC signed an agreement with the local authority in June to build the DKK110m property and then be responsible for operating and maintaining the building, Industriens said.
This move by the seven schemes chimes with suggestions from the government that all LGPS funds should invest in listed assets passively – and via collective investment vehicles – to cut charges.However, this suggestion was made by the previous government, with the new Conservative department suggesting a more lenient approach in this year’s Summer Budget.The £3bn (€4bn) Leicestershire County Council Pension Fund (LCCPF) put a report to its committee last week, seeking formal delegated power to move forward.Leicestershire’s report said the seven schemes, after meeting in early August, agreed to move forward after concluding the assets were sufficient enough to reduce fees for passive equities.Other LGPS schemes are invited to join, providing they can fit into the agreed timescale.Further economies of scale, however, will be unlikely.The outcome of the procurement process is that one manager, instead of four, will invest the assets for the group and provide a pooled investment fund to replicate the indices used by the pension schemes.Should LGPS funds used pooled solutions, they will not be required to tender the appointment formally, as it is seen as an investment decision over a fund manager appointment.The 30% savings figure was given to Leicestershire’s board based on discussions with managers by Cheshire and Staffordshire’s pension schemes.Work – started by Cheshire and Staffordshire – began several months ago, with Leicestershire becoming involved towards the end of May.Its report said the Summer Budget announcement meant the government wanted to see clear action from schemes to reduce costs.“It has been clearly articulated by and to those who are closest to the process that the savings are expected to be significant,” the report said. “A couple of funds working together to negotiate better fees with their managers will save money, but [they do] not get close to the ‘sufficiently ambitious’ requirement of the announcement.”Leicestershire’s report added that it expected the government to favour geographical and asset-class pooled investments for the nearly £200bn LGPS in the 89 schemes in England and Wales, with each to be sized between £20bn and £40bn. Seven UK local government pension schemes (LGPS) from the Midlands are to merge their passive equity investment mandates to cut costs.Led by the pension funds for Cheshire and Staffordshire, the schemes are looking to merge their passive equity holdings with one asset manager to save approximately 30% in investment management charges.The schemes are to appoint an adviser to run the manager-selection exercise – which will form outside of the normal local government procurement process, with the schemes set to use a pooled fund.The parties involved, which also includes Leicestershire’s pension scheme and four other Midlands councils, expect to have an appointment in place by November.
The Greater Manchester, Clwyd and South Yorkshire UK local authority funds have committed to a £60m (€83.7m) small and medium-sized enterprise (SME) development fund.Launched by Foresight Group, it will target SMEs in the North West of England.The fund has attracted £20m from the Greater Manchester Pension Fund (GMPF) – at £17.6bn, the UK’s largest local authority scheme – and an undisclosed amount from the South Yorkshire Pensions Authority and Clywd Pension Fund.The fund will make private equity investments of up to £5m in businesses based in the English regions of Cheshire, Cumbria, Lancashire, Manchester, Merseyside, North East Wales and South Yorkshire. Foresight will open an office in Manchester to oversee investments, which it said would be across all sectors and types of private equity.Kieran Quinn, chairman at the GMPF, said: “This is an excellent example of local government pension schemes working collaboratively to generate commercial returns and provide a positive impact on the local economy.”The GMPF has previously spoken of the challenges in maintaining its 5% target allocation to private equity due to the rate at rate at which the asset class recycles capital.Bernard Fairman, chairman at Foresight, said the fund would seek to support a government initiative to revitalise growth in the UK’s North.“The region,” he said, “has a large number of underfunded SMEs, particularly within the niche engineering and hi-tech manufacturing sectors, creating opportunities for the fund to stimulate growth, generate jobs and deliver healthy risk-adjusted returns to investors.”Colin Everett, chief executive of Clwyd’s administering authority Flintshire County Council, added: “We are keen to collaborate with other local government pension schemes and believe this fund will provide a sustainable local economic impact along with commercial returns.”The GMPF’s £20m investment comes shortly after its £500m infrastructure joint venture with the London Pensions Fund Authority made its first investment, committing to a biomass fund.
A Swiss pension fund has tendered out a $200m (€169m) private equity mandate via IPE Quest.According to search QN-2388, the pension fund is looking to commit to buyout general partners (GPs) in developed economies, with investment in mid to large caps but potentiallly also small cap companies.The benchmark is equity plus 4%.It said there would be an advisory role for private equity categories such as infrastructure, secondaries, co-investments, and venture capita, where the analysis would be carried out in-house. Interested managers should have at least $10bn of assets under management in this investment area. Ideally they would have a track record of at least 10 years, but five years is a minimum.The deadline for applications is 5 January at 17:00 UK time. Performance should be stated to 30 June, gross of fees. The Swiss pension fund’s mandate is one of six asset manager searches live on IPE Quest. Included in that batch, for example, are a €1bn liability-driven investment mandate (QN-2385) and a €200m large cap European equities search (QN-2393).The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest , please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
Small institutional investors are shunning major international custodians in favour of domestic firms, according to research from Germany.The client base for non-domestic global custodians such as BNP Paribas, State Street, JP Morgan, BNY Mellon and HSBC has shrunk, according to a survey conducted by German rating agency Telos. However, assets under custody have continued to increase.Only 38% of institutional investors surveyed used a global custodian in 2017, compared to 60% in 2016. According to the Telos analysts this denoted a “small shift in paradigm”.“Apart from the large institutional investors which have to buy specialised services offered by global custodians, e.g. in the field of ratings or derivatives, it is possible that smaller and medium-sized investors do not want to use these services anymore,” Telos noted in its newest report on the Master KVG market in Germany. The study is available in German here.When they were created in 2001, Master KVGs were intended as service providers for institutional investors. They are the primary structure for institutional investment funds (“Spezialfonds”) in Germany.Over the years Master KVGs have significantly widened their range of services to include more complex investments such as structured products or other alternatives.The growth of the market has meant that German institutional investors no longer have to turn to international providers for custody services as local providers can offer many services under their KVG model – unless they need specific international expertise, want to invest in particularly complex alternative structures or have exceeded a certain size.“Higher sensitivity regarding costs could be a trigger” for the shift to domestic providers, Telos said.Half of all surveyed Master KVGs thought there would be a convergence in the range of services offered by global custodians and Master KVGs, Telos found. The year before only 25% had agreed with this statement.According to German law the custodian for an institutional portfolio has to be a separate entity from the administrator. Given the increased range of services provided by Master KVGs, more investors selected domestic providers like DZ Bank, Deka Bank, LBBW or Helaba for pure custody.However, according to Telos, the international global custodians still make up the top five providers in the German market according to size comprising over €1.2trn in assets under custody.This is mainly because large institutional investors still have to use global custodians because of their size, the complexity of their investments or a need for international expertise.The next ranks among the top 10 are taken up by German providers comprising €300bn in assets under custody.The Telos study also reported a blurring of lines between asset managers and Master KVGs.“It is surprising that the investors are basically switching from the so far steady commitment to clearly separate the Master KVG from pure asset management,” Telos’ analysts said. “This opens new scope for Master KVGs with an integrated asset manager.”Overall, Telos predicted “a broad range of sources” for further business for Master KVGs, such as the integration of direct investments including real estate investments, or increased demand for overlay managements.However, the rating agency also predicted “tough negotiation rounds when it comes to costs”.
At the moment, defined benefit and defined contribution pension schemes with more than 5,000 members are asked to contribute £3.12 (€3.52) per 100 members. In January, IPE revealed that some companies might have been unaware that the FRC’s annual levy was voluntary.One document obtained from the Office of National Statistics (ONS) using the Freedom of Information Act stated: “These guides could be read to indicate that the FRC has or is using statutory powers under the Companies Act 2004 to require payment of the preparers and insurance levy, (ie, the levy here is not voluntary).”Although the levy is voluntary, the FRC has used the threat of inviting the government to put it on a statutory footing if the voluntary arrangement collapses.Sources familiar with the issue have told IPE that some local authority pension schemes ignore the requests for payment. The ONS also established that some firms have refused to pay the levy.The issue came to the fore in March when Liberal Democrat peer Sharon Bowles tabled a parliamentary question in which she described the FRC’s fundraising efforts as “speculative invoicing”.The former MEP also challenged the government to assess “the impact of improper charging”.According to the FRC’s latest budget statement, roughly 4% of its funding comes from pension schemes, while exactly half is provIded by the accountancy and actuarial professions.In addition to its levy on pension schemes, the FRC also asks business and insurance companies to contribute to its funding requirement.It wants to raise £1.2m from the pension levy over the course of the next year. The UK’s Financial Reporting Council (FRC) is to reduce the payments it requests from pension schemes and insurers to fund its oversight work.The watchdog said it was able to cut its levy requests for the year 2018-19 because it had “collected more than originally estimated” through its pension and insurance levies.However, it went on to warn that it could be forced to request higher payments over the course of the next three years.The FRC said in its latest strategy document that it would confirm the level of future levy requests once it had completed a consultation on arrangements for monitoring the quality of actuarial work.
“In a universe that financial and non-financial analysts generally cover less well than developed markets, ERAFP deemed it appropriate to encourage portfolio management processes based on an in-depth analysis of issuers’ fundamentals in order to capitalise on market inefficiencies,” it said in a statement.The SRI approach would involve integrating environmental, social and corporate governance (ESG) criteria into the fundamental analysis, the pension fund said, relying on continuous dialogue with portfolio companies to generate ratings of all issuers in accordance with the pension scheme’s ESG criteria. A mechanism for identifying, evaluating and monitoring controversial practices would be formally established.The pension fund has instructed managers to run a portfolio of non-benchmarked conviction holdings, and said it would not be setting a specific tracking error limit.As at the end of December, ERAFP had 56% of its portfolio in bonds, 30% in equities, and 9% in real estate. The rest was in unlisted assets, and liquidity and diversification pockets. Regulatory constrains mean it has to invest at least 50% in bonds, and no more than 12.5% in real estate and 40% in diversifying assets.ERAFP received the award for best emerging markets strategy at IPE’s 2018 Awards in Dublin in December. France’s civil service pension scheme has awarded a €160m emerging market corporate bond mandate to Aberdeen Asset Management as it seeks to increase its exposure to the asset class through segregated mandates.ERAFP also awarded standby mandates to Amundi and BFT Investment Managers, completing a procurement process that was launched in April last year. If BFT’s mandate were to be activated, the financial management would be delegated to Investec Asset Management, a spokeswoman said.The €29.5bn pension fund has invested in emerging market corporate bonds since 2016 through mutual funds.It said increasing its exposure to the asset class through segregated mandates would allow specific investment guidelines to be applied, in particular with respect to its socially responsible investment (SRI) approach. Credit: Patrick FrostERAFP CIO Catherine Vialonga collects the emerging markets strategy award from Janus Henderson’s Nick Adams
The Queen has pushed for a Pensions Schemes Bill in her speech today, which lays out legislative plans for the forthcoming parliamentary session. The speech follows the Conservative Party’s victory in the UK’s latest general election.The bill includes legislation to enable the pensions dashboard and collective defined contribution (CDC) schemes to go ahead, and it also gives The Pensions Regulator (TPR) more powers to tackle employers that neglect their final salary schemes in favour of paying dividends out to shareholders.If it becomes law, the bill will also address the issue of pension scams, by giving providers new powers to refuse a transfer where there is evidence the scheme they are transferring money to is being used to facilitate scam activity.Nigel Peaple, director of policy and research at the Pensions and Lifetime Savings Association (PLSA), said: “In its first full week in charge, it is pleasing that the new government has signalled its intention to put the more than £2trn of people’s retirement savings at the top of its agenda.” He said workplace pensions are a vital part of the UK economy, providing an essential retirement income for millions of workers and driving growth. He believes the bill will “help people plan for retirement by the introduction of a pensions dashboard and help protect their savings by giving more powers to [TPR]”.He noted, however, that the pensions dashboard should be designed to support retirement planning without exposing savers to the risk of poor decision-making or scams.PPF introduces insolvency risk servicesThe Pension Protection Fund (PPF) has marked the start of its new partnership with Dun & Bradstreet (D&B) by publishing its plans for new services and consulting on its approach to the measurement of insolvency risk from 2021.David Taylor, executive director and general counsel at the PPF, said: “Our proposals for the measurement of insolvency risk build on the strengths of our existing model.”The PPF said the existing insolvency risk methodology has been shown to be working well and only limited changes are proposed largely in response to stakeholder feedback.The PPF and D&B have launched a newly designed digital portal allowing levy payers to view insolvency risk scores calculated by D&B. The first levy invoices to be calculated with D&B will be issued in autumn 2021, based on scores from April 2020.The portal allows users to submit queries online and hold live web chat with customer service advisers.The move to D&B will mean that insolvency risk scores will be adjusted to match actual insolvency experience, the fund said.Taylor believes that “the new services we are introducing – particularly the new portal – are important developments making it quicker and easier to understand and engage with insolvency risk scores”.The PPF is seeking feedback from stakeholders on the new services being introduced, including the portal, and on the proposed approach to the measurement of insolvency risk.The PPF is encouraing its stakeholders to access scores on the new portal and “give their views on the design and scope of new services, and the adjustments being proposed to our insolvency risk methodology,” Taylor noted.The consultation is live on the new look levy section of the PPF website. For the first time, following stakeholder feedback, the PPF has made available functionality to respond to the consultation online, including the option of a short 15-minute version.
The Federal Council is buying time to examine the results of the consultations for the second pillar pension system reform, given the political sensitivity of the matter.The first pillar (AHV), instead, struggles as the current generation pays in and the older generation takes out, with no real accruals and leaving it also suffering with over aging and changing dependency ratios, Aggett added.“Every participant in the system of the first AHV, second pillar and third pillar has to contribute to optimize the system to give people a chance to accrue enough assets to be able to have a comfortable retirement and avoid huge costs for the state, given that life-expectancy is high now and has taken the system by surprise,” he said.The National Council, the lower house of the Swiss Federal Assembly, approved the motion of Erich Ettlin, a member of the upper house Council of States for the Christian Democratic People’s Party (CVP), to change the third pillar system.The proposal allows closing gaps for past unpaid contributions every five years with tax deductions on earnings of CHF34,128 (€31,776) per year. Nils Aggett, VVSEttlin told IPE that his motion makes the third pillar more flexible.“Many people have not worked much or have worked less in the past, and for these people the third pillar was precluded, they could not pay a contribution, even at a later stage,” he said.Women who have not worked but suddenly return to work, and earn money, can now top up their accounts, he added.The VVS, which represents 50-60 foundations of banks and insurance companies in Switzerland active in the third pillar pension system, strongly supported Ettlin’s motion.It stated that people do not pay the maximum contribution in an average year, thus accruing gaps over time.“With the reform people are encouraged to maximise their third pillar savings and accrue assets for retirement,” Aggett said.The reform may end up benefiting insurers and bank foundations, the institutions bound to the third pillar.Ettlin agreed that banks and insurance companies could also benefit from the reform, but highlighted that the change relates in particular to supplementary payments for products.Aggett noted that the third pillar market had recently not been particularly profitable for banks and insurers because around 80% of the assets in the system were held in cash – cash generates costs because of negative interest rates.He added: “The profitability of the third pillar products is driven by investment funds. There is a margin on that, among our members the margin ranges from circa 40 bps to circa 140 bps, with a broad range of products.”“The reform is designed as a win-win, for the customers, the person trying to accrue assets, a win for the companies issuing the products and a win for society as a whole and the retirement system,” Aggett concluded.To read the digital edition of IPE’s latest magazine click here. Reforming the Swiss third pillar pension platform is a sign the national parliamentary system is able to deliver changes, Nils Aggett, president of the Verein Vorsorge Schweiz (VVS), an association representing the interests of third pillar institutions, told IPE.“We are now refocusing and working as a team to help parliament implement the reform quickly, ideally in two or three years. It is not hugely complex to implement,” Aggett said.A testing change to implement could be the adjustment of processes and underlying IT systems of insurers and banks. “This will require a closely coordinated effort by the industry and regulators,” he said.For Aggett, the pension system in Switzerland is “really good”, but it is struggling with an over aging demographic and low, or rather negative, interest rates, while political reforms for the second pillar have proven impossible so far.
119 Barden Ridge Rd, Reedy Creek.A WHIRLWIND interstate trip became one of the most expensive for a Sydney-based buyer after snapping up a million-dollar Gold Coast property.The sprawling views from the Reedy Creek property were too hard for the buyer to resist so he flew into Queensland to see it for himself. 119 Barden Ridge Rd, Reedy Creek. 119 Barden Ridge Rd, Reedy Creek.Marketing agents Matt Micallef and Samantha Turner, of Ray White Robina, said the buyer made his decision as soon as he touched back down in Sydney later that day.“As soon as he saw our views from the property, that’s what made him fly out,” he said.“He booked a flight on Saturday … then that afternoon put in an offer.”The sellers and buyer settled on $1.19 million following negotiations before the sale was cemented last week“It’s the highest sale on Barden Ridge Rd – the highest sale was $1 million,” Ms Turner said. 119 Barden Ridge Rd, Reedy Creek. 119 Barden Ridge Rd, Reedy Creek. 119 Barden Ridge Rd, Reedy Creek.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago 119 Barden Ridge Rd, Reedy Creek.He said the buyer liked that the five-bedroom, three-bathroom home was only two years old and in the exclusive The Observatory estate.He explained interstate buyers were starting to dominate the Gold Coast property market, which was once more popular among Chinese buyers.“The value for money is just second to none,” Mr Micallef said. 119 Barden Ridge Rd, Reedy Creek.